Wednesday, May 31, 2006

Scope of Lanham Act protection for sophisticated consumers

Permacel Kansas City, Inc. v. Soundwich, Inc., 2006 WL 1449979 (W.D.Mo.)

This patent case also involved false advertising claims. Defendant represented that its vibration damping material, a product used by auto makers, was “the same” as plaintiff’s even though its product was cheaper. Defendant sought summary judgment on the ground that its misrepresentations, if any, didn’t lead to purchases; instead, price and auto makers’ own appraisal of quality drove sales.

Part of the court’s concern was that the alleged misrepresentations were made in an informal, individualized sales presentation (as would be natural for a product with a small, specialized market). The ultimate purchaser (Ford) and its intermediate agent both testified that the cost savings from defendant’s product outweighed what they judged was a lower quality. Given that, the court found that any misrepresentation was not a cause of lost sales. The purchasers knew that the salesman’s claim was “atmospheric” and “somewhat exaggerated.”

How to express the basis for the decision in standard Lanham Act terms? Hard to say. There’s a footnote that mentions puffery. Materiality, another plausible candidate, usually is a question of whether a statement is of the type that influence decisions (as quality claims are) rather than whether the statement actually caused a particular purchase decision.

Should sophisticated buyers be held to a higher standard for distinguishing puffery from factual claims? My instinct is that they should not generally be treated as specially able to parse language, since expertise in a particular field does not translate to expertise in the tricks of the seller’s trade. Still, it matters that defendant’s customers only received the claim, and didn’t believe it. In a context with sophisticated buyers weighing fairly objective attributes, perhaps general statements like “the products are the same” should be treated as puffing, even though “sameness” may in other contexts be the type of objectively verifiable claim that can found a false advertising claim (e.g., the claim in JR Tobacco, Inc. v. Davidoff of Geneva (CT), Inc., 957 F. Supp. 426, 433-34 (S.D.N.Y. 1997) that the defendant manufactured identical copies of plaintiff’s premium cigars). The touchstone has to be whether this is the type of claim on which a reasonable consumer of the product at issue would rely.

That reasoning implies, however, that with a purchaser like Ford, almost any statement about the product would be puffing, since Ford apparently conducts independent inspections and tests before committing to buy; only the most unverifiable claims would fall under the Lanham Act. Perhaps that is as it should be; Ford is in a much better position to protect itself against false claims and punish unduly exaggerated sales talk (which at least leads it to waste time inspecting and testing) than an average consumer.

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